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Need assistance in choosing the right insurance plan? Get a call from our Expert.

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TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

Claim Settlement Ratio in Life Insurance: Everything You Need to Know

A life insurance policy is an agreement between the policyholder and the insurance company, wherein the insurer agrees to pay the sum assured in the policy as per the conditions mentioned in the policy document when the insured dies. The policyholder is required to pay periodic premiums to keep the policy active. A beneficiary has to be nominated who can receive the proceeds of the life insurance plan.

The importance of having life insurance cannot be stressed enough, especially a term insurance plan. In the event of your demise, it can provide your dependents with much-needed financial security. The extensive payout from a term plan can safeguard the financial future of your family in your absence.

However, it’s important to note that not all policies are created equal, with each offering various incentives like flexibility in tenures, affordable premiums, and other additional benefits. With a large number of insurance products crowding in the market, narrowing down on a policy that best fits your requirements can be an uphill task.

An essential factor to keep in mind while choosing term insurance plans in India, or any other life cover, is the claim settlement ratio. It’s a percentage that gives you an idea of how likely your claims are to be reliably filed and settled. The numerical, objective feature can help you decide which life insurer to choose.

What Does Claim Settlement Ratio1 Mean?

An insurance company’s claim settlement ratio1 measures the proportion of insurance claims paid out during the financial year. It is determined in the format of a percentage that represents the number of claims an insurer settles against the total claims filed; thus, the higher the ratio, the better the insurer.

Why is the Claim Settlement Ratio1 Important?


The value of a life insurance policy lies in the assurance that in the unfortunate event of your demise, your beneficiaries will be able to claim insurance coverage and look after their current and future financial needs. This is the fundamental agreement made between the policyholder and the insurance company, so insurers try to honour as many claims as possible.

Having said that, there are specific situations where your claim might be rejected. This could include an error on your behalf, such as missing or incorrect information while filling out forms or failing to mention certain medical conditions while availing of the life insurance policy. Other reasons could be related to the insurer, such as incompetent practices and low trustworthiness.

Life insurance policies are only as reliable as the insurance company that provides them. The term plan claim settlement ratio1 will help you form an accurate opinion about the competence and reliability of a potential insurer.

The Insurance Regulatory and Development Authority in India (IRDAI) publishes the Claim Settlement Ratios1 for every insurance company in the country every financial year. More claim settlement ratio1 symbolizes more customer satisfaction experience as well as a competent underwriting procedure.

The number can help you determine that an insurance company can be relied upon to fulfil the claim to your nominees in your absence, provided all the policy conditions are met.

How is Claim Settlement Ratio1 Calculated?

Insurers use a simple formula to calculate the Claim Settlement Ratio1:

Claim Settlement Ratio1 = (Total Claims Approved / Total Claims Received) * 100

 

 As mentioned earlier, the result is expressed in the form of a percentage. Suppose an insurance company has a claim settlement ratio1 of 80%. It indicates that 80 claims are settled and paid out for every 100 claims received by the insurance company. You should remember that the claim settlement ratio1 is an aggregate of claims on all forms of insurance offered by the insurance company, not just that of claims paid out for life insurance policies.

Limitations of Claim Settlement Ratio1

As crucial as the metric is to determine which policy to buy, there are certain limitations in terms of the information a claim settlement ratio provides:

 

  • It's an estimated ratio:

    The declared claim settlement ratio1 is the sum total of all claims paid out by an insurance company for all its life insurance policies and other products. What you see is only an estimated ratio and not the actual ratio for different types of policy – from term insurance and endowment covers to child plans, group insurance, money-back policies, online plans, and so on.

  • It's expressed as a percentage:

    The claim settlement ratio1 is provided as a percentage and not an actual number. This might be misleading as it does not clarify how many claims an insurance company has actually rejected. For instance, an insurance firm dismissing 100 out of 1,000 claims will boast a 90% Claim Settlement Ratio1. The following year, it may receive 10,000 claims but turn down 500 of them. The company's claim settlement ratio has increased to 95% even though it has rejected more claims.

  • It doesn’t indicate the settlement time:

    The claim settlement ratio1 of life and term insurance plans in India doesn’t denote how long an insurer takes to settle claims. According to the IRDAI, insurers are required to settle claims within 30 days when there is no need to investigate the cause of death. However, some companies might do it much faster, which denotes a smooth, hassle-free claims process and adds to its credibility.

Despite these limitations, the life or term plan claim settlement ratio1 is one of the clearest indicators of a good insurer.

Term Insurance Plans with More Claim Settlement Ratio

With industry-leading term insurance claim settlement ratios1, the term insurance policies at Tata AIA are among the most reliable in the country. As per IRDAI Annual Report 2019-20, the life insurance claim settlement for Tata AIA stood at 99.06%. In particular, a TATA AIA Life Insurance  plan offers not only a convenient claims process but also a host of benefits, such as the flexibility to choose your payout as a lump sum or income (or both).

You will also be eligible for tax* deductions on the premiums paid towards the policy under Section 80C of the Income Tax Act.

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimers

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
  • #Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch
  • 1Individual Life Claim Settlement Ratio is 98.53% for FY 2021 - 22 as per the latest annual audited figures